The Analyst Call of the Day: Netflix

Netflix, Inc. (NASDAQ: NFLX) is trading up on a day where the markets have been very mixed. The reason for the gain is an analyst upgrade from Bank of America/Merrill Lynch, taking the prior Underperform rating up to a Buy rating.

This is the 24/7 Wall St. Analyst Call of the Day, and we are not giving this award with the prediction that the call will be right. Netflix has been so controversial and its performance has been so erratic that this is simply the gutsiest call the firm could make. It was not even a move from Underperform to Neutral, which might have garnered some interest too. It was effectively taking it from a Sell to Buy.

At the end of July we had Netflix shares around $80, but after earnings the stock immediately fell to $60 and then ultimately down to under $53 before its recent recovery. What is interesting is that there is no massive ringing endorsement or a change of opinion on CEO Reed Hastings and his management antics. The analyst team has been cautious for about 6 months or so and this call is that the sell-off has gone way too far.

The move up today was understated because no one cares about analyst reports in August. The 2.5% gain to $63.27 has only been on 3.7 million shares with 45 minutes before the close.

We will revisit this analyst call in a few weeks after the trading desks are staffed again and after investors are no longer just on lock-down mode ahead of a vacation.